United States District Court, S.D. New York
For Progress Bulk Carriers, Plaintiff: William Robert Bennett, III, LEAD ATTORNEY, Blank Rome LLP, New York, NY.
For American Steamship Owners Mutual Protection and Indemnity Association Inc., Defendant: Peter Skoufalos, LEAD ATTORNEY, Patrick Robert O'Mea, Brown Gavalas & Fromm LLP, New York, NY.
FRANK MAAS, United States Magistrate Judge.
MEMORANDUM DECISION & ORDER
This case arises out of an insurance coverage dispute. Plaintiff Progress Bulk Carriers (" Progress Bulk" ) charters and operates ocean-going vessels. Defendant American Steamship Owners Mutual Protection and Indemnity Association (" American Club" or " Club" ) is a protection and indemnity association that provides marine insurance coverage to vessel owners and charterers, including Progress Bulk. In this action, Progress Bulk contends, and the American Club denies, that the Club improperly declined to indemnify Progress Bulk for liabilities that it had incurred after cargo being transported aboard a ship chartered by Progress Bulk was rejected in a Chinese port.
The rules applicable to such claims contain a section concerning " Disputes" (" Disputes Provision" ), which requires that any dispute regarding coverage be brought in the first instance before the Club's Board of Directors (" Board" ). The Club contends that this Disputes Provision limits this Court's review of the Board's decision to deny coverage to Progress Bulk to the record that was before the Board at the time it reached its decision. Accordingly, the Club has moved, pursuant to Rule 26(c) of the Federal Rules of Civil Procedure, for a protective order (1) limiting the scope of discovery to the record that was before the Board, and (2) affording Progress Bulk only a single deposition of a specified witness. For the reasons explained below, that motion is granted in part and denied in part.
A. Rules Governing Claims Before the American Club
The American Club is a non-profit mutual protection and indemnity association (commonly referred to as a " P & I Club" ), which differs from a traditional insurance provider in that its members operate both as the insurers and the insureds. (Aff. of George Tsimis, sworn to on October 4, 2012 (ECF No. 16) (" Tsimis Aff." ), ¶ ¶ 2-3). In exchange for the payment of premiums and assessments, the American Club's members " collectively agree to mutually indemnify each other" for liabilities arising out of the operation of insured vessels. (Id. ¶ 3).
A member's right to coverage is governed by the American Club's By-Laws and Rules. (Id. ¶ 4). Included among the Rules is a Disputes Provision which states, in relevant part:
If any difference or dispute shall arise between a Member and the [Club] concerning the construction of these Rules, or the insurance afforded by the [Club] under these Rules, or any amount due from the [Club] to the Member, such difference or dispute shall in the first instance be referred to and adjudicated by the [Board]. No Member shall be entitled to maintain any action, suit or other legal proceedings unless and until the same has been submitted to the [Board] . . . . Any such suit against the
[Club] shall be brought in the United States District Court for the Southern District of New York.
(Id. Ex. B at 40-41).
The Rules further contain a section regarding waiver, which states that:
No act, omission, course of dealing, forbearance, delay or indulgence by the [Club] in enforcing any of these Rules or any contractual terms and conditions shall prejudice or affect the rights and remedies of the [Club] under these Rules or under such contracts, and no such matter shall be treated as any evidence of waiver of the [Club's] rights thereunder, nor shall any waiver of a breach by a Member of such Rules or contracts operate as a waiver of any subsequent breach thereof. The [Club] shall at all times and without notice be entitled to insist on the strict application of these Rules and on the strict enforcement of its contracts.
(Id. at 39) (" Anti-Waiver Provision" ).
In addition, the Rules contain a choice of law provision, which mandates that the " Rules and any contract of insurance between the [Club] and a Member shall be governed by and construed in accordance with the ...